The US Securities and Exchange Commission (SEC) said on Tuesday it obtained an injunction and asset freeze against a man behind a popular Twitter account that promoted the trading of penny stocks before selling them at inflated prices.
The SEC alleges that since at least December 2019, Steven Gallagher, 50, of Maumee, Ohio, manipulated stocks by sending thousands of tweets using his handle @AlexDelarge6553 to encourage his numerous followers to buy stocks in which Gallagher had secretly amassed holdings, according to the complaint.
"The complaint alleges that Gallagher used his followers for his own financial gain, tweeting out false advice to pump up the price of stocks he owned, so he could sell for a profit," said Richard Best, director of the SEC's New York Regional Office. "This case is a reminder that investors should be wary of taking financial advice from unverified sources on Twitter and other social media platforms."
The SEC said it has imposed a permanent injunction, disgorgement, prejudgment interest, civil penalties and a freezing of Gallagher's assets.
A representative of Gallagher could not immediately be reached for comment.
The U.S. Department of Justice also said in a related charge that Gallagher had been arrested for additional violations, including wire fraud and market manipulation, after he gained over 70,000 followers related to the same pump-and-dump scheme. The charge also specified that Gallagher earned over US$1 million in profit.
The SEC's charges come after the agency in February suspended trading in the securities of 15 companies because of "questionable trading and social media activity."
The top markets watchdog has also pushed to address soaring interest by retail investors fueled by social media platforms, most notably in the January surge and subsequent plunge of GameStop Corp's share price.